Paying back your student loan can feel like an ongoing task that never ends, and that might be because for some graduates, it doesn't. The Telegraph report tens of thousands of students continue to pay money to their Student Loans Company despite clearing the debt, due to outdated systems not informing them that the loan has cleared.
A new report, featuring figures released under the Freedom of Information Act, shows that in the 2015-2016 tax year, almost 90,000 students continued to make payments towards their student loan, despite the fact they'd already repaid it in full. A total of £51 million (!) was overpaid during that year, with some individual students paying up to £10,000 extra.
So, how is this happening?
The majority of students repay their loans through their payroll from employers directly to HMRC. Graduates can see on their payslip each month how much they have paid towards student finance, and this repayment data is collected by HMRC monthly.
However, the problem in the system is largely down to the fact HMRC does not pass this data onto the Student Loans Companies immediately - rather waiting to do it once a year at the end of the tax-year.
On April 5 (the end of the tax-year),the Student Loans Company receives this information, and can calculate the outstanding loan amount on students' accounts. Often, they discover that someone has been overpaying for months, but didn't realise due to HMCR's report coming too late.
On top of this, The Telegraph say some data only reaches the Student Loans Company seven months after the end of the tax-year, which means not only it is already out of date, but that graduates have to wait even longer to see how much they owe - or if they'd overpaid.
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What's being done about it?
While the Student Loans Company and HMRC claim they are working on the problem, students are advised to keep an eye on their own repayments when they think they're getting close to paying off their loan, or consider cancelling their repayments through their payroll and set up a direct debit instead.
Graham Farquhar, a partner at accounting firm RSM, said:
"It’s disappointing. HMRC is keen that employers pay everything in real time and there is no such thing as a year’s grace. It’s interesting that this doesn’t seem to apply to HMRC itself. I would encourage those who graduated about four or five years ago to really look closely at their repayments, and how close they are to paying it off."
A spokesman for the Student Loans Company added:
"HMRC and Student Loans Company continually explore how we can manage repayment information more effectively, including sharing repayment data more frequently.”
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Dusty Baxter-Wright is an award-winning journalist and the Entertainment and Lifestyle Director at Cosmopolitan, having previously worked at Sugarscape. She was named one of PPA’s 30 Under 30 for her work covering pop culture, careers, interiors and travel, and oversees the site’s Entertainment and Lifestyle strategy across print, digital and video. As a journalist for the best part of a decade, she has interviewed everyone from Louis Theroux and Channing Tatum to Margot Robbie and Ncuti Gatwa, while she has also spoken on Times Radio and BBC Radio. You can find her on Twitter and Instagram here.
